The company will provide services including fixed-line phone, voice-over Internet Protocol (VoIP), paging and Internet access. Its network covers 28 of China's 32 municipalities, provinces and autonomous regions, including 500 large and middle-sized cities around the country, according to company figures.

It is expected to expand its service coverage over the next three to five years and become a potential major player in the industry, particularly in the VoIP and data transmission segments, an official from the company said.

The arrival of China Railway Telecom's services may come as a boon for many Chinese customers who are seeking an alternative to China Telecom, which has a de facto monopoly on the fixed-line phones.

China Railway Telecom may challenge China Telecom with its extensive fixed-line infrastructure: a 120,000-km network of trunk and branch lines that run alongside the country's railways.

"The establishment of China Railway Telecom will make a total change in China's telecom industry," commented Xie Xiaoxia, researcher with the Chinese Academy of Social Sciences.

"China Telecom's monopoly will be finished by the new firm," Xie said.

But officials of China Railway Telecom have played-down the potential threat to China Telecom, saying the new firm still had a long way to go before it could compete with the industry leader.

"We could only provide a second choice for telecom users," an official from the company said.

According to the statistics provided by the company, it has 65,000 employees--more than three times that of China Unicom's 20,000.

The heavy employee burden becomes the first barrier in the rapid development of China Railway Telecom.

While China Railway Telecom can operate a basic telecom business with domestic long-distance services, local services, data transportation and Internet-related businesses, it does not have the infrastructure to provide mobile telecom and international long-distance services.

Headquartered in Beijing, it has 29 branch companies in the country's four municipalities and 25 provincial capitals.

However, despite its extensive railway coverage, most part of railway telecom's network is outmoded and needs to be rebuilt or upgraded, a company source said.

Moreover, the company is in dire need of capital and technology specialists.

To satisfy the capital shortage, the company may have to go public overseas or in the domestic stock market. The source said the company hoped to make an IPO (initial public offering) within three years.

China Mobile and China Unicom, the only two mobile operators in China, are listed in overseas bourses and other telecom companies are also keen on going public soon.

The company is applying for licences to start mobile telecom and international long-distance call business, which are pending approval from the State Council.

Insiders believe that the Ministry of Information Industry is likely to issue more licences to mobile telecom operators to break the oligopoly in the mobile telecom sector.

China Railway Telecom has the ability to become the first new operator to get a licence, analysts said.

China's telecommunications industry has expanded rapidly in recent years. The total revenue of China's telecommunications industry reached 349.8 billion yuan (US$42.25 billion) in 2000, up 24.8 percent from 1999, official statistics indicate. The total telecom services revenue was 307.4 billion yuan(US$37.13 billion), up 26.4 percent. Among China's largest telecom companies, China Telecom generated 170.9 billion yuan (US$20.64 billion) in revenue; China Mobile, 111.6 billion yuan (US$13.48 billion); and China Unicom, 24.5 billion yuan (US$2.96 billion).

(21dnn.com 02/27/2001)